Morgan Stanley: Weak demand in China and Europe to hit Carnival

Morgan Stanley slashed its 12-month price target on Carnival by 11 percent to $54 on Friday, downgrading the stock to "underweight" from "equal-weight" on concerns over weak demand from Europe and China, and in the Caribbean due to the Zika virus.

"Our monthly agents survey suggests cruise demand weakened in August, with prices also softening," equity analyst Jamie Rollo wrote in a note to clients. "With the industry orderbook at a record high, Europe/China likely to stay weak and Caribbean risks rising, we see yields continuing to slow."

The analyst believes the pace of cruise bookings for the rest of 2016 and 2017 has already slowed down, despite aggressive pricing promotions and other marketing incentives from cruise lines.